The Full Cost of the Drilling Moratorium

posted at 10:05 am on December 4, 2010 by Jazz Shaw

While the original story of the new drilling moratorium was covered here at Hot Air, the new unemployment numbers which came out this week highlight an even more disturbing aspect of this proposal by the administration. Jack Gerard of the American Petroleum Institute (API) sent out a rather graphic warning to President Obama on Wednesday which laid out the danger of such a decision.

Jack Gerard warned that the administration’s decision today not to allow offshore drilling in the eastern Gulf of Mexico, the Atlantic and the Pacific in the government’s next five-year drilling plan could result in the loss of tens of thousands of American jobs, billions less in government revenues and an increasing dependence on foreign energy sources.

In a longer study compiled by API, some of the alarming facts and figures are brought to light.

By 2020, these jobs could have grown nation-wide to more than 57,000

Also by 2020, government could have reached annual revenue collection exceeding $3.8 billion and still rising. By extending a moratorium on these areas which have been held off limits for decades, Americans are denied benefits such as these from this valuable economic activity.

But even this doesn’t tell the full story. Retreating on this front will impact far more than the direct jobs and revenue involved in energy exploration. As this story shows, the industry stretches out to provide opportunities far from the actual oil rigs. A prime example is that of Thomas Clements, who operates a business manufacturing machine parts for equipment used in energy exploration. He’s been struggling with government energy policy and its effect on his operation for some time now and went to petition his government for redress of grievances back in August.

At that time, thanks to the deepwater drilling moratorium, Clements, who co-owns a small business that produces metal parts for oilfield equipment, had no income. Not quite three months later, Clements still lives on his savings — and business is down by 54 percent for the year.

“Right now, we’re living off savings and that’s it,” he said Monday on a conference call. “It’s everything we’ve saved up. We’ve worked our entire lives to get to this point. … We were supposed to be in the black this year. We’re definitely still in the red and, in the future, we’re not too sure what it looks like even though the moratorium is lifted.”

Until the Interior Department begins to issue permits at a higher rate, Clements said, his business prospects will remain uncertain. While the drilling moratorium technically applied only to deepwater drilling, the Interior Department’s permits for shallow water drilling slowed, too — by 53 percent. The department has yet to pick up the pace. It continues to issue 3.8 fewer shallow-water drilling permits a month than it did the year leading up to the oil spill. No new deepwater permits have been issued since May.

This “permitorium” as it is being called is hitting people across a number of industries and the service sector as well. Even in spaces where drilling is not being expressly forbidden, the government is dragging its feet on the issuance of new permits bringing a large swath of economic activity – along with the corresponding jobs which might be produced – to a screeching halt.

The last gulf oil spill was bad news, no doubt. And it serves as a reminder that we must continue to work to increase safety and containment measures. But it does nothing to alleviate our need for both domestic energy resources in an uncertain global climate and the jobs that come from such endeavors. Let’s hope the next Congress can talk some sense into those currently holding opportunity in check.

This post was promoted from GreenRoom to HotAir.com.
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Jazz, Obviously you are unfamiliar with “downstream” business from JUST the de facto moratorium in the Gulf of Mexico.

90% of the Ethylene Crackers in the U.S. are located in Texas and Louisiana near the coast. That is 90% of the most important building block chemical. They are located here for one reason, and that is abundant supplies of natural gas from offshore. Most modern ethylene crackers use natural gas liquids as the feedstock and ALL ethylene crackers use copious amounts of natural gas for the reformer furnaces as fuel.

Present natural gas production will not last forever and inexpensive vast deposits have been discovered offshore. The initial “wildcat” well is not the one generally used to produce a field. It is exploratory and normally is drilling in somewhat of a corkscrew fashion to obtain geological samples for the data crunchers. It is the later wells drilled which actually produce oil & natural gas.

Thus the various moratoriums not only affect the drilling and production employment but also a great many more jobs.

Pardon my ignorance…but aren’t there International waters not subject to American enviromental laws?

Firmworm on December 4, 2010 at 10:21 AM

Good question. There are two things to consider. The first is Territorial Waters which extends 7 miles from the coast. The second is the economic exclusion zone which extends 200 miles from the shore. The later is only in regards to fishing and minerals from the seawater (such as magnesium), the sea floor and those mineral deposits under the sea floor.

Here in the U.S. only U.S. flagged vessels can transport goods and passengers from the shore to a foreign location AND back from it (part of the Jones Act). The vast majority of drilling rigs, and specialty boats and ships are foreign flagged.

When the big hubub broke out about there not being foreign flagged vessels working on the spill, it was pure ignorance. There were a plenty of them, including Dutch skimmers and vessels out in the open sea. There was some really bad reporting.

According to a study by economist John Urbanchuk, domestic ethanol production returned $8.4 billion in taxes to the Federal government, which is $3.4 billion more than the cost of the tax incentive.

and supplies jobs at ave cost of 55k per…vrs Obama Porkulus at over 100k cost per

sbark on December 4, 2010 at 10:25 AM

The energy balance is all out of whack in those plants. They require a good amount of natural gas and electricity to produce less energy than consumed.

Many of those built over the last decade have some flaws in them and a great many are barely limping along even with Federal and State subsidies. There are no ethanol plants where there is NOT and additional State subsidy.

Just follow the money, who is getting rich off all these regulations, George Soros for one, I think he owns controlling shares of Petrogas? in Brazil, the same country we just gave billions(your taxpayer money) for oil exploration off their coast.

The safe food bill, Soros just bought 360 million dollars worth of shares in Monsanto on 11/17/10, do you really think that is a coincidence, I don’t think so, he is the puppetmaster in the WH.

New York State has a tax on gasoline at 19% and with the price just over $3.00 a gallon the tax per gallon is just over 57 cents. Oil companies have a profit margin at around 5%. Figures don’t lye but lyers can figure.

“Do you allow yourself to be held hostage and get something done for the sake of getting something done, when in fact it might be perverse in its ultimate results? It’s almost like the question of do you negotiate with terrorists.”

In the black, in the red, don’t use such big economic terms when you complaining to the govt and our leader about how bad your business has become since he’s been in charge and has imposed those moratoriums. They won’t understand.

Why should American oil companies stay American? There is a long list of countries that would provide incentives for relocation, and with them the ability to explore their territory and waters. At the same time, they would certainly end up with lower corporate taxes and other lower costs.

If a country is unfriendly to a business, they have a duty to stockholders to leave for a better host country.

Why should American oil companies stay American? There is a long list of countries that would provide incentives for relocation, and with them the ability to explore their territory and waters. At the same time, they would certainly end up with lower corporate taxes and other lower costs.

If a country is unfriendly to a business, they have a duty to stockholders to leave for a better host country.

slickwillie2001 on December 4, 2010 at 11:50 AM

Outside of the U.S. virtually all of oil AND natural gas is owned by State Oil Companies. ExxonMobil, Chevron, Shell et al are VERY SMALL companies in comparison.

could result in the loss of tens of thousands of American jobs, billions less in government revenues and an increasing dependence on foreign energy sources.

Count it!

-crr6

darwin on December 4, 2010 at 11:21 AM

When we refer to oil & natural gas strictly as “Energy” we have not only lost the battle but also the entire war. That is a fact that the vast majority of Americans are totally oblivious to, especially wannabe pundits.

According to a study by economist John Urbanchuk, domestic ethanol production returned $8.4 billion in taxes to the Federal government, which is $3.4 billion more than the cost of the tax incentive.

and supplies jobs at ave cost of 55k per…vrs Obama Porkulus at over 100k cost per

sbark on December 4, 2010 at 10:25 AM

I’ll buy into the ethanol argument when all the energy required to produce ethanol comes from ethanol, with the excess production going into the market and producing a sufficent profit to run the business. Right now, it ain’t even close, it takes about 30% more energy to produce a gallon of ethanol than is contained in a gallon of ethanol.

The irony is that by cutting off the offshore drilling opportunities, Obama has caused a huge surge in onshore drilling for natural gas, especially in the shale formations of North-Central and West Texas, which is one of the reasons why the recovery in the state has outpaced by far the rest of the U.S., helping make Texas’ conservative economic policies look even better. (Although the current fight in New York and Pennsylvania by environmental activists over fracking in the Marcellus Shale formation could down the line lead the Obama EPA to try and curtail and/or eliminate that 60-plus-year-old fossil fuel recovery technique, which would also serve to kill onshore drilling in other parts of the country as well.)

I lost a contract job that would have extended until next May. I was taking application for the Transportation Workers Identification Credentials (TWIC). This ID is mandatory for all American workers on offshore oil platforms but with the moratorium, hiring of U.S. only workers dried up and now those non-American oil field servicing companies (like BP) are hiring South American workers who, ironically, don’t have to have a TWIC card. My contract called for approximately 100 hours a month at $55 an hour plus expenses so the effect of the moratorium is/was very real to me.

Those who thought Obama was too naive to be president now realize they were being too kind. The insanity of his actions and the terrible economic turmoil he causes with one idiotic decision after another removes all doubt he is much worse than could ever been perceived. Ariel Durant said,”A great civilization cannot be conquered from without until it destroys itself from within.” We are watching our economy and our contry’s values being destroyed by someone named Barry Soetero. The nightmare is just beginning.

Stories like this are especially maddening to me because everyone in my family voted for Barack Obama but me. And when I try to point out his failings, as shown here, they just reflexively deny them and say I just heard it on some conservative talk show, as if that automatically disqualifies the facts.

I don’t even want to imagine what they’ll say when I try to show that Barack Obama is destroying entire families with the permitorium, that he’s crushing businesses and industries for no reason. They might blame Bush for all I know!

Stories like this are especially maddening to me because everyone in my family voted for Barack Obama but me. And when I try to point out his failings, as shown here, they just reflexively deny them and say I just heard it on some conservative talk show, as if that automatically disqualifies the facts.

I don’t even want to imagine what they’ll say when I try to show that Barack Obama is destroying entire families with the permitorium, that he’s crushing businesses and industries for no reason. They might blame Bush for all I know!

R. Waher on December 4, 2010 at 6:57 PM

It is surprising how many people, like you and I, are having this exact problem. And no matter how many completely different sources report the same story over time, it seems many people are unwilling to ever accept the truth.

Unfortunatly, this problem is not just limited to Obama. For 2 years I pointed out how the Federal Reserve was buying treasury notes. I was called every possible name and told to ‘quit listening and reading such lies’. Over the last few months, as Bernanke has admitted he was buying treasuries, and plans to buy billions more, these same people will no longer even talk to me. Since these are educated people, MBA’s, I really have no idea how they came to such inflexible positions.

This is really no problem because Obama and the Democrats are busy creating 10’s of millions of green jobs that cannot be shipped overseas. Look at the unemployment figures if you don’t believe that. The figures would be 10’s of millions of lost jobs higher if it weren’t for Obama and the Democrats creating those green jobs promised by Obama during the campaign of 2008. Rest assured that the Democrats will not rest until more green jobs that cannot be shipped overseas have kept the unemployment figures from going even higher. Obama and the Democrats have also done a fine job reducing our dependence on foreign oil. That is due to the wonderful green economy that they have created by subsidizing auto purchases through job creating programs like cash for clunkers and $150,000,000 gifts to wind farms from printing presses controlled by the Democrat party. “Green money borrowed on our children’s tab for our green economy” should be the Democrat motto for the campaign of 2012.

I lost a contract job that would have extended until next May. I was taking application for the Transportation Workers Identification Credentials (TWIC). This ID is mandatory for all American workers on offshore oil platforms but with the moratorium, hiring of U.S. only workers dried up and now those non-American oil field servicing companies (like BP) are hiring South American workers who, ironically, don’t have to have a TWIC card. My contract called for approximately 100 hours a month at $55 an hour plus expenses so the effect of the moratorium is/was very real to me.

Thanks alot, you jerk

E9RET on December 4, 2010 at 6:13 PM

TWIC (mostly pronounced twix) cards are required for EVERYONE working along and in any navigable waterway. It requires a 10 year FBI background check. If you screwed up in the past, have paid your debt to society and list it, you can still obtain one. If you lie, you don’t.

The guy across the street from me has four wells, and a buddy of mine has oil seeping into his pond. This stuff is everywhere just waiting to be tapped. Sarah, our next president, needs to bring us an energy revolution. Imagine what cheap energy would do for the free market.

TWIC (mostly pronounced twix) cards are required for EVERYONE working along and in any navigable waterway. It requires a 10 year FBI background check. If you screwed up in the past, have paid your debt to society and list it, you can still obtain one. If you lie, you don’t.

Kermit on December 4, 2010 at 9:51 PM

The TWIX card is not yet required in Southern California drilling, we are progressing there soon.